Want Outperformance? These 5 Stocks Show Relative Strength

Wall Street charged higher in May, snapping back from recent turbulence with renewed vigor. Driving this momentum were growing hopes of a U.S.-China trade deal, a tariff delay on the European Union, and promising signs from broader trade negotiations. Investors flocked back to equities as confidence in the market’s stability returned, positioning stocks for potential further gains in June.

Adding fuel to the rally is a cooling inflation backdrop. The Fed’s preferred gauge, core PCE, rose just 0.1% in April and is inching closer to the central bank’s 2% target. This sets the stage for a more supportive monetary stance and continued bullish sentiment. 

In this environment, investors would do well to focus on relative price strength — a smart strategy for identifying winners as the market climbs. At this stage, investors would be wise to consider stocks such as OppFi Inc. OPFI, Allient Inc. ALNT, Pagaya Technologies Ltd. PGY, Great Lakes Dredge & Dock Corporation GLDD and NetEase, Inc. NTES based on their relative price strength.

Relative Price Strength Strategy

Earnings growth and valuation multiples are indeed important for investors to determine a stock's ability to offer considerable returns. However, these are also essential for determining whether a stock’s price performance is better than its peers or the industry average.

If a stock’s performance is lacking that of the broader groups, despite impressive earnings growth or valuation multiples, then something must be wrong.

It’s always advisable to stay away from these stocks and bet on those that are outperforming their respective industry or benchmark. This is because betting on a winner always proves to be lucrative.

Then again, it is imperative that you determine whether or not an investment has relevant upside potential when considering stocks with significant relative price strength. Stocks delivering better than the S&P 500 for 1 to 3 months, at least, and having solid fundamentals, indicate room for growth and are the best ways to go about this strategy.

Finally, it is crucial to find out whether analysts are optimistic about the upcoming earnings of these companies. In order to do this, we have added positive estimate revisions for the current quarter’s (Q1) earnings to our screen. When a stock undergoes an upward revision, it leads to additional price gains.

Screening Parameters

Relative % Price change – 12 weeks greater than 0

Relative % Price change – 4 weeks greater than 0

Relative % Price change – 1 week greater than 0

(We have considered those stocks that have been outperforming the S&P 500 over the last 12 weeks, four weeks and one week.)

% Change (Q1) Est. over 4 Weeks greater than 0: Positive current-quarter estimate revisions over the last four weeks.

Zacks Rank equal to 1: Only Zacks Rank #1 (Strong Buy) stocks — that have returned more than 26% annually over the last 26 years and surpassed the S&P 500 in 23 of the last 26 years — can get through. You can see the complete list of today’s Zacks #1 Rank stocks here.

Current Price greater than or equal to $5 and Average 20-day Volume greater than or equal to 50,000: A minimum price of $5 is a good standard to screen low-priced stocks, while a high trading volume would imply adequate liquidity.

VGM Score less than or equal to B: Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best upside potential.

Here are five of the 12 stocks that made it through the screen:

OppFi: The company is a tech-enabled specialty finance platform that powers community banks to help everyday consumers gain access to credit. OppFi, with a VGM Score of A, has a current market capitalization of $1.1 billion.

Notably, over the past 60 days, the Zacks Consensus Estimate for OppFi’s 2025 earnings has moved up 15%. It beat the Zacks Consensus Estimate for earnings in each of the last four quarters, the average being 59.5%. OPFI shares have surged 326% in a year.

Allient: Based in New York, the company designs, manufactures, and sells precision motion control systems and components, serving diverse global markets, including industrial, medical, vehicle, and aerospace and defense, with integrated solutions and standalone products. ALNT, with a VGM Score of A, has a current market capitalization of $534.5 million.

Notably, over the past 60 days, the Zacks Consensus Estimate for Allient’s 2025 earnings has moved up 4.9%. It beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other, the average being 19.7%. ALNT shares have gained 25% in a year.

Pagaya Technologies: Based in New York, Pagaya Technologies is an AI-driven fintech firm, enhancing credit decisioning and underwriting, enabling lenders to expand access and manage risk efficiently across consumer platforms in a large, growing market. The company has a market capitalization of $1.3 billion. Pagaya Technologies has a VGM Score of A.

The Zacks Consensus Estimate for the company’s 2025 earnings per share indicates 195.2% year-over-year growth. Pagaya Technologies beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed in the other two. It has a trailing four-quarter earnings surprise of roughly 12.9%, on average. The firm’s shares are up 43.3% in a year.

Great Lakes Dredge & Dock: It is America’s top dredging contractor. Headquartered in Houston, it operates a vast fleet of 200 vessels and is expanding into offshore energy. The company also has a strong record of global marine project execution. The Zacks Consensus Estimate for 2025 earnings of Great Lakes indicates 10.7% growth. The company has a VGM Score of A.

Over the past 60 days, the Zacks Consensus Estimate for Great Lakes’ 2025 earnings has moved up 34.8%. The company has a market capitalization of $789.3 million. GLDD shares have gone up 26% in a year.

NetEase: Based in Hangzhou, the company develops applications, services, and other technologies for the Internet in China. NTES, with a VGM Score of B, has a current market capitalization of almost $80 billion.

Notably, over the past 60 days, the Zacks Consensus Estimate for NetEase’s 2025 earnings has moved up 9.1%. It beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other, the average being 9.4%. NTES shares have gained 35% in a year.

You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. 

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.

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This article originally published on Zacks Investment Research (zacks.com).

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